How a total n00b mined $700 in bitcoins

We take a Butterfly Labs Bitcoin miner, plug it in, and make it (virtually) rain.

This is the second in a two-part series exploring Butterfly Labs and its lineup of dedicated Bitcoin-mining hardware. In part one, we looked at the company and the experiences customers have had with it. In part two, we share our experiences running a Bitcoin miner for a couple weeks.

Toiling in the Bitcoin mines

There is a whirring, whining presence in my dining room. I notice it every time I walk through. Every day, it sucks down about one full kilowatt-hour of electricity. In a year, it will consume almost $100 worth of juice—and that's on top of the $274 it costs to buy the box in the first place. Oh, and it's hot, too. If I moved it into my office and could stand the noise, I could keep a cup of coffee comfortably warm on top of the thing. Why on earth would anyone want such a disagreeable little machine in their home?

The short answer: every day, that machine magically generates something like $20 in bitcoins.

The BFL miner: A video intro

Allow me to introduce you to the Butterfly Labs 5GH/s "Jalapeño" Bitcoin miner.

A newbie and his miner

Ars Senior Business Editor Cyrus Farivar tapped me on the shoulder a few weeks back with a proposition. "I've got a Butterfly Labs Bitcoin mining box," he explained. "There aren't that many in the wild right now. I'm working on a story about the company, but I'm about to go on vacation. Do you want to see if you can get the thing working while I'm out?"

I was intrigued. Bitcoin? That's the electronic currency that's quickly rocketed from lame nerd project to ludicrously valuable hot topic, right? I didn't know a lot about the world of Bitcoin other than the fact that "mining" them involved people building custom PCs with tons of video cards to handle the math. I certainly didn't know how to "mine" bitcoins myself or what to do with the things once I had them. I just knew that people eventually try to trade them in for cash somehow (but how to do that was also a total mystery).

And yet here was the opportunity to take a piece of hardware I'd never heard of and see if I could use it to magically create some money out of nowhere. I told Cyrus to send me the Butterfly Labs miner. As he trekked off to Peru for his vacation, I settled in with the little black box.

Butterfly Labs is a company that has drawn a fair amount of controversy for what the Bitcoin community at large perceives as a string of broken promises. The company sells ASIC-based Bitcoin miners—machines that are built around customized chips that do nothing except compute SHA-256 hashes very quickly. Its smallest miner (the one I had to get working) is codenamed "Jalapeño" and computes a bit over five billion hashes per second (or 5GH/s). The problem is that Butterfly Labs started selling the machines long before it actually had a product to sell. It began taking paid-in-full preorders back in mid-2012, and thousands of customers opened their wallets for Bitcoin miners ranging from the small 5GH/s miner at $274 all the way up to the large 500Gh/s miner, which costs $22,484.

Butterfly Labs promised certain performance targets to customers—it initially felt confident that its application-specific integrated circuit (ASIC) designs would deliver one billion hashes per second for every 1.1 watt of power consumed. This proved extremely optimistic. Hardware delivery slipped multiple times. Now, a full year later, the first few real live Butterfly Labs boxes are finally being shipped, though no small number (as many as 30) were sent to journalists to review rather than to paying customers.

But when the little black box showed up on my doorstep, I had no idea about the deep and extremely vocal Bitcoin community or the story behind Butterfly Labs. I didn't really even fully understand what the miner did. I simply knew that I wanted to get this thing working and make some money.

Out of the box

The 5GH/s Jalapeño miner is a black rounded cube with a brushed metal finish. The only connectors on the exterior of the device are on the back: a mini-USB port for data and a power plug. Near the power plug are a series of small red LEDs that the device uses to tell you its status, though there was no documentation in the box to explain what the LEDs meant. The front of the cube contains another red LED to indicate power.

There are two sets of vents, one low on the front and the other high on the rear. The device's internal 80 mm fan draws cooler air up from the front through the fins of the large heat sink mounted on the ASIC chip. It expels the now-warm air out through the top vents.

Front view of the Butterfly Labs 5GH/s Jalapeño miner. The understated Butterfly Labs logo is on the top of the device; visible on its front are the air intake vents.

Front view of the Butterfly Labs 5GH/s Jalapeño miner. The understated Butterfly Labs logo is on the top of the device; visible on its front are the air intake vents.

Another look at the front of the Jalapeño. The exterior of the device is dark brushed metal.

Beneath the metal shell, the interior of the miner is dominated by the ASIC's heatsink. The 80 mm fan, removed for this image, sits atop the heatsink.

The rear of the Jalapeño miner, showing the power and mini-USB connectors.

The Jalapeño miner, disassembled.

After I unboxed the thing and took some photos, I was sort of stuck. I had no idea what to do with the little rounded-off cube.

Before I consulted the Internet for documentation, I tried briefly—and in vain—to see if I could make it work on my own. "I am a geek, and I work at Ars Technica, which is a major technology website of some renown," I thought. "I have built Web servers. I use, like, Linux and stuff. How hard can this really be?"

Too hard, apparently. Connecting it via USB to any of the computers I had handy didn't really cause anything to happen. The device showed up on the USB bus and identified itself, but it didn't do anything. I naively wondered if there was some kind of application I needed to download to "log on" to the device to get it mining.

Enlarge/ When connected via USB, the miner shows up as a "BitFORCE SHA256 SC," which is the ASIC identifier.

Lee Hutchinson

I admitted defeat and consulted the Internet. Unfortunately, as I was to quickly learn, I was coming at the miner with a certain set of false assumptions. The BFL miner is a pretty simple device; it doesn't have an "interface" or a console or anything like that at all. It talks via serial-over-USB, and you do need an application running on your computer to actually do anything with it.

In fact, you need several things: a mining application, a "wallet," and a "pool," though the pool is optional.

Dear people! 1 suckern born in every minute and two who takes his money.......P.T. BarnumAnd I prove it to you: You have a company.and you are having a lot of little boxes that generates 6000 dollars cash per year. If it is true than why would you sell those little boxes......just fire them up and start become rich...immagine 1000 little boxes mining money for you....only one way I would rather sell those little boxes if I wouldnt trust them to make me richer. That simple folks. Dont beleive all the garbage,stay with Seti if You wanna play......we are not suckers here in hungary......

This has already been addressed multiple times in both the article and the comment threads. The simple explanation is that they can make money NOW and be liquid by selling the devices without being exposed to the risks of the Bitcoin market. There is money to be made in both places (probably), but the safer money is in producing devices.

In addition to selling pre-built devices like BFL, ASICMiner and Avalon are also selling their bare chips to hobbyists, so yes, you are free to roll your own hardware if you have the time and interest in the hobby. As I mentioned in an earlier post, you may want to look at Virtual Mining Corp (VMC) to see how a clever entrepreneur purchased components from Avalon to build custom miners of his own that he's both selling and "renting" to anyone who wishes to get into the mining business without running their own hardware.

This has already been addressed multiple times in both the article and the comment threads. The simple explanation is that they can make money NOW and be liquid by selling the devices without being exposed to the risks of the Bitcoin market. There is money to be made in both places (probably), but the safer money is in producing devices.

Ah, but an even safer way is to do both at the same time. That is:

1) Sell devices via pre-order (taking the money immediately).2) Produce the devices and run them yourself for as long as you can.3) Fulfill a few orders and send out review units to show everyone that the devices are real, thus preventing potential investigations and luring further orders.4) Once operation is no longer profitable, fulfill all remaining orders.

Of course, I have no idea if that is what was actually done here, but if people are willing to wait on the order of a year for their orders (and it seems that they are), then this is the most profitable method. If anyone intends to buy anything of the sort, I would suggest having a firm shipping date before ordering or not allowing the money to be pre-charged or something of the sort.

More generally, I agree with nibb and others that this defeats the idea of decentralization. It is one thing to have anyone with a computer be able to run this and quite another for it to be effectively restricted to those specialized ASICs and FPGAs. LiteCoin seems to at least partially address this problem, although I suspect if it caught on, there would still be custom hardware (it just would not be as effective).

[But there are other vendors shipping ASIC devices right now. You mentioned Avalon, who are shipping their second batch of 300 units, which mine at 67Ghs/sec, and are taking orders for a third batch. They are also selling the bare ASIC chips they designed so you could build your own box if you know what you're doing (check out VMC for an ingenious example of this). ASICMiner are selling blades of their own custom ASIC chips as well as some nifty little USB sticks with a single ASIC chip that can mine at 330Mhs/sec (about the same as a GPU), but consume only 3 Watts of power. Then there is the Swedish firm KnCMiner which is a bit like Butterfly Labs in that they are taking pre-orders for ASIC devices, but haven't shipped any product yet.

To be more specific, when I say "shipping" I mean "I can place an order today and have product in some reasonable timeframe" - let's say less than a month.

Other than the USB key, which is fairly pricey, can you point to a vendor selling and shipping right now?

I see numerous people in the thread suggesting there are, but I'm not finding anything. Avalon is not selling anything, BF is shipping in 2 months "or more"...

[But there are other vendors shipping ASIC devices right now. You mentioned Avalon, who are shipping their second batch of 300 units, which mine at 67Ghs/sec, and are taking orders for a third batch. They are also selling the bare ASIC chips they designed so you could build your own box if you know what you're doing (check out VMC for an ingenious example of this). ASICMiner are selling blades of their own custom ASIC chips as well as some nifty little USB sticks with a single ASIC chip that can mine at 330Mhs/sec (about the same as a GPU), but consume only 3 Watts of power. Then there is the Swedish firm KnCMiner which is a bit like Butterfly Labs in that they are taking pre-orders for ASIC devices, but haven't shipped any product yet.

To be more specific, when I say "shipping" I mean "I can place an order today and have product in some reasonable timeframe" - let's say less than a month.

Other than the USB key, which is fairly pricey, can you point to a vendor selling and shipping right now?

I see numerous people in the thread suggesting there are, but I'm not finding anything. Avalon is not selling anything, BF is shipping in 2 months "or more"...

To me it looks like the better business here is to pre-sell hardware.

Bet you they all do a nice long "burn in" for QC before shipping.

Okay, I took delivery of a BFL Jalapeno today, and it is mining right next to me as I type this, hashing away at 5.72Ghs/sec. Of course, I ordered it back in September 2012, so I'm not all that happy with their service, but the thing is here, it works and it puts all four of my GPU miners to shame.

You can buy an ASICMiner USB stick today, and have it delivered tomorrow if you want to pay for overnight shipping. Avalon is shipping, but because they were first to market, they are swamped with orders, and are only taking payment in BTC (and they ship from China, so expect some delay there, and be prepared to buy your own power supply). There are quite a few people selling ASIC miners on eBay, but of course, the markup is outrageous. If you want to mine with an ASIC right now, your best bet is the ASICMiner USB device, and I expect our local Bitcoin meetup group will have them within the week. I ordered some of these last weekend when I wasn't sure I'd ever get the Jalapeno, so I will probably sell one or two of them after they arrive (I ordered six). If you really, really really want to play around with this stuff, I'll sell you one of my spare USB sticks at my cost (1 BTC).

[But there are other vendors shipping ASIC devices right now. You mentioned Avalon, who are shipping their second batch of 300 units, which mine at 67Ghs/sec, and are taking orders for a third batch. They are also selling the bare ASIC chips they designed so you could build your own box if you know what you're doing (check out VMC for an ingenious example of this). ASICMiner are selling blades of their own custom ASIC chips as well as some nifty little USB sticks with a single ASIC chip that can mine at 330Mhs/sec (about the same as a GPU), but consume only 3 Watts of power. Then there is the Swedish firm KnCMiner which is a bit like Butterfly Labs in that they are taking pre-orders for ASIC devices, but haven't shipped any product yet.

To be more specific, when I say "shipping" I mean "I can place an order today and have product in some reasonable timeframe" - let's say less than a month.

Other than the USB key, which is fairly pricey, can you point to a vendor selling and shipping right now?

I see numerous people in the thread suggesting there are, but I'm not finding anything. Avalon is not selling anything, BF is shipping in 2 months "or more"...

To me it looks like the better business here is to pre-sell hardware.

Bet you they all do a nice long "burn in" for QC before shipping.

Okay, I took delivery of a BFL Jalapeno today, and it is mining right next to me as I type this, hashing away at 5.72Ghs/sec. Of course, I ordered it back in September 2012, so I'm not all that happy with their service, but the thing is here, it works and it puts all four of my GPU miners to shame.

You can buy an ASICMiner USB stick today, and have it delivered tomorrow if you want to pay for overnight shipping. Avalon is shipping, but because they were first to market, they are swamped with orders, and are only taking payment in BTC (and they ship from China, so expect some delay there, and be prepared to buy your own power supply). There are quite a few people selling ASIC miners on eBay, but of course, the markup is outrageous. If you want to mine with an ASIC right now, your best bet is the ASICMiner USB device, and I expect our local Bitcoin meetup group will have them within the week. I ordered some of these last weekend when I wasn't sure I'd ever get the Jalapeno, so I will probably sell one or two of them after they arrive (I ordered six). If you really, really really want to play around with this stuff, I'll sell you one of my spare USB sticks at my cost (1 BTC).

1. Nice you have one, but do you think the ones ordering this year will get their devices? I don´t think so. And by next year, the Jalapenos will be a paper brick.

2. The USB sticks you mentioned are already a brick, they will generate like 1 bitcoin a year, and it costs like 2 times that. It was said in the bitcoin forums several times, its just a toy to play with it, but it costs more than it will ever produce.

3. Avalon stopped orders as far as I see, and they where limited as well in the first place.

Right now, there is not a single vendor shipping ASIC devices, and by shipping I mean something decent like 1 or 2 weeks. It seems they produce it with the same consumers money.

Good luck with your japaneno, it will probably make you some profit if its connected right now, but it will probably stop making profits by the end of this year. At least you will get your ROI back, as opposed to all others that still have to receive theirs.

The only ones that can possible get some ROI back, as the ones like you, that ordered last year. Ordering this year or now would be just amazingly stupid since they did not even shipped those ordering in January.

I never argue that this device in the review is great NOW. But not in a few months. Also there is something yet to be tested, durability. Most that are using them, connected them very recently. Lets see how much time until they fry, as I read someone that actually burned its device already, actually dangerous, could start a fire. Smoking devices will happen, just hope you are not one of them.

Then your ROI will be completely wasted, as im very, very sure this devices do not have standard quality testings on them like computer gear usually has. And since they are in a huge hurry to produce and ship them, its just logic to expect more quality issues than usual.

If someone buys this, it should be just for hobby, testing or as mere bitcoin passion. But as investment its a very bad one.

Good luck with your japaneno, it will probably make you some profit if its connected right now, but it will probably stop making profits by the end of this year.

You don't know this. What is most likely going to happen is that as ASICs become common, the hobbyists who were using their GPUs and FPGAs will go offline, as they won't be as efficient anymore. As a result, the total network hash speed will stabilize.

Quote:

The only ones that can possible get some ROI back, as the ones like you, that ordered last year. Ordering this year or now would be just amazingly stupid since they did not even shipped those ordering in January.

[/quote]

This assumes that the rate of production remains constant. We don't know if that's the case. In fact, now that BFL has some capital, it is likely they are investing a portion of it to expand the production line. The initial orders may have taken eight months to fulfill, but the next batch will probably take less. This is just speculation of course but it's generally how it works in tech.

Great article. I'm sorry Ars didn't keep the machine for extend period so we could see if a trend developed that proved or disproved some of the logical predictions made in comments. (Similar to Consumer Reports or various auto magazines. Of course they purchase the item being tested.) Even a 3 or 6 month time frame would have shown some interesting results. And I'm sure the EFF could have used the contributions.

It's already kinda late to get into bitcoin mining:http://bitcoindifficulty.com/If for the rest of 2013 the difficulty evolves at the same rate by the time you receive your 5GHz Jalapeno it will probably be too late.I never had a suitable rig to start the mining. This article seams interesting but it's too late for me. When I found about Butterfly labs they sold boards not devices and though it seamed interesting I had no idea what to do with them. And for everybody that got interested in Butterfly Labs early on they delayed shipments way way to much so I am glad I didn't get seriously interested when I found out about them.

@Hagen - Fire off an email to the macminer maintainer and let him know. We initially had some trouble with ensuring all the dependencies were properly checked and updated; it sounds like you need to update your libcurl library.

Basically, like with most gold rushes, by the time it becomes common knowledge it isn't worth doing anymore.

Agree. Lee was a little misleading in the article. He was able to make the money he did because he is essentially the first to use the next generation hardware. As soon as others adopt the technology the values are going to drop 10x, 20x or even more.

The beauty of bitcoin is that it self regulates to make sure that miners don't receive a windfall forever.

I was interested in Butterfly Labs until I found that they're only now shipping units ordered and paid in June 2012. How can you screw up supply and distribution this badly when you're effectively making a machine that prints money?

I'm not plonking down $2500 for a machine that may not be delivered for months or even years, and which in all likelihood will be worth much, much less (due to rising difficulty levels in mining) by the time it does arrive.

I checked the exchange today and it is $76 per BTC. Much less then the $150 it was when this article came out? It sounds like the gold rush is already over, or getting there.

It's been in the high 70s for a week. BTC had good support at about $100 but this appeared to get cut by 20-25% last week for some reason.

Ironically if BL ever does get around to delivering units within a reasonable amount of time the price will collapse very rapidly. However since they're only delivering year-old orders at this point this will take some time.

How long did it take to get your box? I really don't want to dump that kind of cash and then have to wait six months. Also, how hard is it to build a custom machine to mine?

Thanks.

He only got the box so quickly because (I am assuming) that this is a review site. Normal folks like us will be waiting anywhere to a year plus ... The company simply isn't shipping to anyone but reviewers.

As it stands, there is NO way to get an ASIC miner without building one ourselves.

Yes, WE KNOW the thing spews out money like it's going out of style. THAT'S WHY SO MANY OF US HAVE GIVEN BFL OUR MONEY TO GET ONE.

But is everyone getting what they paid for? Nope.

Is some BTC-illiterate journalist for a high-profile tech blog getting one, so as to generate hype? YOU BETCHA!!!11one!!!

Last I gave a **** enough to check, they had shipped something like TEN that people had actually paid for, but gee golly gosh if they aren't Johnny-on-the-spot with sending out not one, but TWO for marketing purposes.

This said, dear author, it's not your fault. You just got used to further their scam.

Pity you didn't keep the money. Might as well have been compensated for how you got used.

The folks on BFL's forums are a wee bit furious, pointing out that BFL is 9 mo behind on one item, and further behind on the bigger, more expensive items. http://www.bitcoinx.com/profit/ claims one of the BFL items (the 50G hash device) would take 92 days to break even - if the difficulty stayed at 112million. For the last few weeks, it's been jumping 10-20Million a week. Which should increase dramatically as other manufacturer's mining equipment goes online soon. Not a great time to be promised an August delivery date, and seeing how far out your order is likely to be.

A good article; lots of knowledgeable comments. But after going through three pages of five month old comments, I noticed that no one mentioned the possibility that the value of a bit coin might skyrocket. Which, of course, it did.

What strikes me odd about the lack of mention is the fact that, aside from its use as black market money, as demonstrated by Silk Road, bit coin mining or purchasing is pure currency speculation. So for a short time, ordinary people might spend 300 - 1500$ to for a hash generator to get into the game and make some money. But that situation can't last. Either BTC as a whole will go bust or it will become dominated by highly capitalized big money players.

One other point of skepticism - 21 million of them? If there are only 21 million, there's little incentive for many goods and service providers to begin or continue to accept them. Why not let the customer deal with the hassle of conversion?

So basically it seems like a hi-tech poker game. If you get in at the right moment and are lucky you could make out like a bandit. But even if you make out, you then have the further gamble regarding when to convert to cash. Then it's like the market. You hold. Oooh, the value's going up, up, up --- now you need the cash, ooops, it tanked.

The problem with overclocking is that if you have to increase voltage, you get a non-linear increase in power draw, i.e. the power efficiency is guaranteed to go down, which is the primary factor here. On the other hand, you have to fit the "profit" curve to the incredibly rapid depreciation of the miner's value as a miner, so there is that, too.

Overclocking means you run the processor clock faster than it's specified to run. This causes a nearly linear increase in power consumption since power consumption in most digital circuits is proportional clock rate plus a fixed standby power. Depending on the device's design, it may or may not be possible to overclock it -- one or more components may already be running at the maximum rate at which it works reliably.

If the device is well designed, it will go into thermal throttling if you run it too hot. Depending on your environmental conditions, it may already be operating in that condition and the best way of increasing processor throughput (and bitcoin output) would be to provide it with better cooling. For example, modifying the heat sink or ducting cooler air would cool the processor and allow it to run longer without throttling.

"nearly linear power increase" is completely false. Overclocking requires an increase of gate voltage in the processor, and the gate can be modeled as having capacitance (being charged and discharged every time it is switched). not only is there an increase in the frequency in switching, but the c-v energy equation tells us that an increase in voltage (even if the relationship between clock frequency and voltage increase is linear -- which is best case scenario) the result is square relationship with clock speed.

I read through almost every previous comment, forgive me if this is a repeat question...

Does anyone know if BFL has any plans to upgrade the Jalapeno devices with some kind of backplane connector that would allow daisy chaining the devices?

Plugging them all into a USB hub (USB chaining) is not the same as true load-balanced distributed processing like in a quad CPU server box (4x CPU slots, not quad core), or even a clustered server configuration.

Would true backplane daisy chaining multiple Jalepeno devices, each at 10GH/s and effectively operating together as a pool, process a greater quantity of hashes Than each independently via USB?

I read through almost every previous comment, forgive me if this is a repeat question...

Does anyone know if BFL has any plans to upgrade the Jalapeno devices with some kind of backplane connector that would allow daisy chaining the devices?

Plugging them all into a USB hub (USB chaining) is not the same as true load-balanced distributed processing like in a quad CPU server box (4x CPU slots, not quad core), or even a clustered server configuration.

Would true backplane daisy chaining multiple Jalepeno devices, each at 10GH/s and effectively operating together as a pool, process a greater quantity of hashes Than each independently via USB?

Pretty significant difference in cost per GH/s. Also a much higher potential ROI with the card.

Nope, the USB version is already designed to run as fast as possible 100% of the time. Load balancing won't help you there A "cluster" of them won't help either because there's no need for them to talk to each other. They get a little initialization data from the host, then just send hashes back. Plugging a bunch of them into a USB hub will already give you top speed, it's not holding back performance.

Lee Hutchinson / Lee is the Senior Reviews Editor at Ars and is responsible for the product news and reviews section. He also knows stuff about enterprise storage, security, and manned space flight. Lee is based in Houston, TX.